ÖANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________
to ___________

Commission File Number 0-4776

STURM, RUGER & COMPANY, INC.

(Exact Name of Registrant as Specified in Its
Charter)

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)

06-0633559

(I.R.S. Employer

Identification No.)

Lacey Place, Southport, Connecticut

(Address of Principal Executive Offices)

06890

(Zip Code)

(203) 259-7843

(Registrant’s telephone number, including
area code)

Securities registered pursuant to Section
12(b) of the Act:

Title of Each Class

Common Stock, $1 par value

Name of Each Exchange on Which Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g)
of the Act:

None

(Title of Class)

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YESÖNO

Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO Ö

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YES ÖNO

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [ _].

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer [
Ö]
Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ].

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YESNO Ö

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

YES ÖNO

The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of June 30, 2016:

Common Stock, $1 par value - $1,192,892,000

The number of shares outstanding of the registrant's
common stock as of February 17, 2017:

Common Stock, $1 par value
– 18,104,900 shares

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the registrant’s Proxy Statement
relating to the 2017 Annual Meeting of Stockholders to be held May 9, 2017 are incorporated by reference into Part III (Items 10
through 14) of this Report.

In
this Annual Report on Form 10-K, Sturm, Ruger & Company, Inc. and Subsidiary (the “Company”) makes forward-looking
statements and projections concerning future expectations. Such statements are based on current expectations and are subject to
certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings,
the need for external financing for operations or capital expenditures, the results of pending litigation against the Company,
the impact of future firearms control and environmental legislation, and accounting estimates, any one or more of which could cause
actual results to differ materially from those projected. Words such as “expect,” “believe,” “anticipate,”
“intend,” “estimate,” “will,” “should,” “could” and other words and
terms of similar meaning, typically identify such forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to publish revised forward-looking statements to reflect events or circumstances after the date such forward-looking
statements are made or to reflect the occurrence of subsequent unanticipated events.

Sturm, Ruger & Company, Inc. and Subsidiary
(the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Virtually
all of the Company’s sales for the year ended December 31, 2016 were from the firearms segment, with approximately 1% from
the castings segment. Export sales represent approximately 3% of firearms sales. The Company’s design and manufacturing operations
are located in the United States and almost all product content is domestic.

The Company has been in business since 1949
and was incorporated in its present form under the laws of Delaware in 1969. The Company primarily offers products in three industry
product categories – rifles, pistols, and revolvers. The Company’s firearms are sold through independent wholesale
distributors, principally to the commercial sporting market.

The Company manufactures and sells investment
castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in the firearms segment
and has minimal sales to outside customers. The castings and MIM parts sold to outside customers, either directly or through manufacturers’
representatives, represented approximately 1% of the Company’s total sales for the year ended December 31, 2016.

For the years ended December 31, 2016, 2015,
and 2014, net sales attributable to the Company's firearms operations were $658.4 million, $544.9 million and $542.3
million. The balance of the Company's net sales for the aforementioned periods was attributable to its castings operations.

Firearms Products

The Company presently manufactures firearm
products, under the “Ruger” name and trademark, in the following industry categories:

Rifles

Revolvers

·

Single-shot

·

Single-action

·

Autoloading

·

Double-action

·

Bolt-action

·

Modern sporting

Pistols

·

Rimfire autoloading

·

Centerfire autoloading

Most firearms are available in several models
based upon caliber, finish, barrel length, and other features.

A rifle is a long gun with spiral grooves cut
into the interior of the barrel to give the bullet a stabilizing spin after it leaves the barrel. Net sales of rifles by the Company
accounted for $264.9 million, $208.5 million, and $203.9 million of total net sales for the years 2016, 2015, and 2014, respectively.

Pistols

A pistol is a handgun in which the ammunition
chamber is an integral part of the barrel and which typically is fed ammunition from a magazine contained in the grip. Net sales
of pistols by the Company accounted for $250.0 million, $192.2 million, and $198.2 million of revenues for the years 2016, 2015,
and 2014, respectively.

Revolvers

A revolver is a handgun that has a cylinder
that holds the ammunition in a series of chambers which are successively aligned with the barrel of the gun during each firing
cycle. There are two general types of revolvers, single-action and double-action. To fire a single-action revolver, the hammer
is pulled back to cock the gun and align the cylinder before the trigger is pulled. To fire a double-action revolver, a single
trigger pull advances the cylinder and cocks and releases the hammer. Net sales of revolvers by the Company accounted for $104.9
million, $113.3 million, and $112.8 million of revenues for the years 2016, 2015, and 2014, respectively.

Accessories

The Company also manufactures and sells accessories
and replacement parts for its firearms. These sales accounted for $38.6 million, $30.3 million, and $23.9 million of total net
sales for the years 2016, 2015, and 2014, respectively.

Castings Products

Net sales attributable to the Company’s
casting operations (excluding intercompany transactions) accounted for $5.9 million, $6.2 million, and $2.2 million, for 2016,
2015, and 2014, respectively. These sales represented approximately 1% of total net sales in each of these years.

Manufacturing

Firearms

The Company produces one model of pistol, all
of its revolvers and most of its rifles at the Newport, New Hampshire facility. Most of the Company’s pistols are produced
at the Prescott, Arizona facility. Some rifle models and one pistol model are produced at the Mayodan, North Carolina facility,
which began operations in the latter months of 2013.

Many of the basic metal component parts of
the firearms manufactured by the Company are produced by the Company's castings segment through processes known as precision investment
casting. The Company also uses many MIM parts in its firearms. See "Manufacturing- Investment Castings and Metal Injected
Moldings" below for a description of these processes. The Company believes that investment castings and MIM parts provide
greater design flexibility and result in component parts which are generally close to their ultimate shape and, therefore, require
less machining than processes requiring machining a solid billet of metal to obtain a part.

Through the use of investment castings
and MIM parts, the Company endeavors to produce durable and less costly component parts for its firearms.

All assembly, inspection, and testing of firearms
manufactured by the Company are performed at the Company's manufacturing facilities. Every firearm, including every chamber of
every revolver manufactured by the Company, is test-fired prior to shipment.

Investment Castings and Metal Injected Moldings

To produce a product by the investment casting
method, a wax model of the part is created and coated (“invested”) with several layers of ceramic material. The shell
is then heated to melt the interior wax, which is poured off, leaving a hollow mold. To cast the desired part, molten metal is
poured into the mold and allowed to cool and solidify. The mold is then broken off to reveal a near net shape cast metal part.

Metal injection molding is a three part powder
metallurgy process by which a feedstock consisting of finely powdered metal and binders is processed through injection molding,
debinding, and sintering equipment to produce steel, stainless steel, and alloy parts of complex shape and geometry. This
process allows for high volume production while eliminating many of the wastes of traditional metal working methods, yielding
net shape and near net shape parts.

Marketing and Distribution

Firearms

The Company's firearms are primarily marketed
through a network of federally licensed, independent wholesale distributors who purchase the products directly from the Company.
They resell to federally licensed, independent retail firearms dealers who in turn resell to legally authorized end users. All
retail purchasers are subject to a point-of-sale background check by law enforcement. These end users include sportsmen, hunters,
people interested in self-defense, law enforcement and other governmental organizations, and gun collectors. Each distributor
carries the entire line of firearms manufactured by the Company for the commercial market. Currently, 18 distributors service
the domestic commercial market, with an additional 23 distributors servicing the domestic law enforcement market and 41 distributors
servicing the export market.

In 2016, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-19%; Lipsey’s-17%; Jerry’s/Ellett
Brothers-15%; and Sports South-14%.

In 2015, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-18%; Lipsey’s-17%; Sports South-13%, and
Jerry’s/Ellett Brothers-11%.

In 2014, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-19%; Lipsey’s-13%; Sports South-13%, and
Jerry’s/Ellett Brothers-12%.

The Company employs 17 employees who service
these distributors and call on retailers and law enforcement agencies. Because the ultimate demand for the Company's firearms comes
from end users rather than from the independent wholesale distributors, the Company believes that the

loss of any distributor would
not have a material, long-term adverse effect on the Company, but may have a material adverse effect on the Company’s financial
results for a particular period. The Company considers its relationships with its distributors to be satisfactory.

The Company also exports its firearms through
a network of selected commercial distributors and directly to certain foreign customers, consisting primarily of law enforcement
agencies and foreign governments. Foreign sales were less than 5% of the Company's consolidated net sales for each of the past
three fiscal years.

The Company does not consider its overall firearms
business to be predictably seasonal; however, orders of many models of firearms from the distributors tend to be stronger in the
first quarter of the year and weaker in the third quarter of the year. This is due in part to the timing of the distributor show
season, which occurs during the first quarter.

Investment Castings and Metal Injected Moldings

The castings segment provides castings and
MIM parts for the Company’s firearms segment. In addition, the castings segment produces some products for a number of customers
in a variety of industries.

Competition

Firearms

Competition in the firearms industry is
intense and comes from both foreign and domestic manufacturers. While some of these competitors concentrate on a single
industry product category such as rifles or pistols, several competitors manufacture products in all four industry categories
(rifles, shotguns, pistols, and revolvers). Some of these competitors are subsidiaries of larger corporations than the
Company with substantially greater financial resources than the Company, which could affect the Company’s ability to
compete. The principal methods of competition in the industry are product innovation, quality, availability, brand and price.
The Company believes that it can compete effectively with all of its present competitors.

Investment Castings and Metal Injected Moldings

There are a large number of investment castings
and MIM manufacturers, both domestic and foreign, with which the Company competes. Competition varies based on the type of investment
castings products and the end use of the product. Companies offering alternative methods of manufacturing such as wire electric
discharge machining (EDM) and advancements in computer numeric controlled (CNC) machining also compete with the Company’s
castings segment. Many of these competitors are larger corporations than the Company with substantially greater financial resources
than the Company, which could affect the Company’s ability to compete with these competitors. The principal methods of competition
in the industry are quality, price, and production lead time.

As of February 1, 2017, the Company employed
approximately 2,110 full-time employees, approximately 24% of whom had at least ten years of service with the Company. The Company
uses temporary employees to supplement its workforce. As of February 1, 2017, there were approximately 320 temporary employees
in addition to the full-time employees.

None of the Company's employees are subject
to a collective bargaining agreement.

Research and Development

In 2016, 2015, and 2014, the Company spent
approximately $8.7 million, $8.5 million, and $10.0 million, respectively, on research and development activities relating to
new products and the improvement of existing products. As of February 1, 2017, the Company had approximately 141 employees whose
primary responsibilities were research and development activities.

Patents and Trademarks

The Company owns various United States and
foreign patents and trademarks which have been secured over a period of years and which expire at various times. It is the policy
of the Company to apply for patents and trademarks whenever new products or processes deemed commercially valuable are developed
or marketed by the Company. However, none of these patents and trademarks are considered to be fundamental to any important product
or manufacturing process of the Company and, although the Company deems its patents and trademarks to be of value, it does not
consider its business materially dependent on patent or trademark protection.

Environmental Matters

The Company is committed to achieving high
standards of environmental quality and product safety, and strives to provide a safe and healthy workplace for its employees and
others in the communities in which it operates. The Company has programs in place that monitor compliance with various environmental
regulations. However, in the normal course of its manufacturing operations the Company is subject to governmental proceedings and
orders pertaining to waste disposal, air emissions, and water discharges into the environment. These regulations are integrated
into the Company’s manufacturing, assembly, and testing processes. The Company believes that it is generally in compliance
with applicable environmental regulations and that the outcome of any environmental proceedings and orders will not have a material
adverse effect on the financial position of the Company, but could have a material adverse effect on the financial results for
a particular period.

Set forth below are the names, ages, and positions
of the executive officers of the Company. Officers serve at the discretion of the Board of Directors of the Company.

Name

Age

Position With Company

Michael O. Fifer

59

Chief Executive Officer

Christopher J. Killoy

58

President and Chief Operating Officer

Thomas A. Dineen

48

Vice President, Treasurer and Chief Financial Officer

Mark T. Lang

60

Group Vice President

Thomas P. Sullivan

56

Vice President of Newport Operations

Kevin B. Reid, Sr.

56

Vice President, General Counsel and Corporate Secretary

Shawn C. Leska

45

Vice President, Sales

Michael O. Fifer joined the Company as Chief
Executive Officer on September 25, 2006, and was named to the Board of Directors on October 19, 2006. Mr. Fifer also served as
President from April 23, 2008 to December 31, 2013. Mr. Fifer will retire effective May 9, 2017 and will
continue to support the Company as Vice Chairman of the Board of Directors after his retirement.

Christopher J. Killoy became President and
Chief Operating Officer on January 1, 2014. Previously he served as Vice President of Sales and Marketing since November 27, 2006.
Mr. Killoy originally joined the Company in 2003 as Executive Director of Sales and Marketing, and subsequently served as Vice
President of Sales and Marketing from, November 1, 2004 to January 25, 2005. Mr. Killoy will succeed
Michael O. Fifer as Chief Executive Officer upon Mr. Fifer's planned retirement effective May 9, 2017.

Thomas A. Dineen became Vice President on May
24, 2006. Previously he served as Treasurer and Chief Financial Officer since May 6, 2003 and had been Assistant Controller since
2001. Prior to that, Mr. Dineen had served as Manager, Corporate Accounting since 1997.

Mark T. Lang joined the Company as Group Vice
President on February 18, 2008. Mr. Lang is responsible for management of the Prescott Firearms Division and Ruger Precision Metals,
the Company’s MIM subsidiary. Prior to joining the Company, Mr. Lang was President of the Custom Products Business at Mueller
Industries, Inc. Prior to joining Mueller, Mr. Lang was the Vice President of Operations for the Automotive Division of Thomas
and Betts, Inc.

Thomas P. Sullivan joined the Company as Vice
President of Newport Operations for the Newport, New Hampshire Firearms and Pine Tree Castings divisions on August 14, 2006. Mr.
Sullivan is also responsible for the Mayodan, North Carolina Firearms division.

Kevin B. Reid, Sr. became Vice President and
General Counsel on April 23, 2008. Previously he served as the Company’s Director of Marketing from June 4, 2007. Mr. Reid
joined the Company in July 2001 as an Assistant General Counsel.

Shawn C. Leska became Vice President, Sales
on November 6, 2015. Mr. Leska joined the Company in 1989, and has served in a variety of positions in the sales department. Most
recently, Mr. Leska served as Director of Sales since 2011.

Where You Can Find More Information

The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and accordingly, files its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Definitive Proxy Statements, Current Reports on Form 8-K, and other
information with the Securities and Exchange Commission (the "SEC"). The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. Please call the SEC at (800) SEC-0330
for further information on the Public Reference Room. As an electronic filer, the Company's public filings are maintained on the
SEC's Internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that website is http://www.sec.gov.

The Company makes its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Definitive Proxy Statements, Current Reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act accessible free of charge through the Company's Internet
site after the Company has electronically filed such material with, or furnished it to, the SEC. The address of that website is
http://www.ruger.com. However, such reports may not be accessible through the Company's website as promptly as they are accessible
on the SEC’s website.

Additionally, the Company’s corporate
governance materials, including its Corporate Governance Guidelines, the charters of the Audit, Compensation, Nominating and Corporate
Governance, and Risk Oversight committees, and the Code of Business Conduct and Ethics may also be found under the “Stockholder
Relations” subsection of the “Corporate” section of the Company’s Internet site at http://www.ruger.com/corporate.
A copy of the foregoing corporate governance materials is available upon written request to the Corporate Secretary at Sturm,
Ruger & Company, Inc., Lacey Place, Southport, Connecticut 06890.

ITEM 1A—RISK FACTORS

The Company’s operations could be affected
by various risks, many of which are beyond its control. Based on current information, the Company believes that the following identifies
the most significant risk factors that could adversely affect its business. Past financial performance may not be a reliable indicator
of future performance and historical trends should not be used to anticipate results or trends in future periods.

In evaluating the Company’s business,
the following risk factors, as well as other information in this report, should be carefully considered.

Changes in government policies and firearms
legislation could adversely affect the Company’s financial results.

The sale, purchase, ownership, and use of
firearms are subject to thousands of federal, state and local governmental regulations. The basic federal laws are the National
Firearms Act, the Federal Firearms Act, and the Gun Control Act of 1968. These laws generally prohibit the private ownership of
fully automatic weapons and place certain restrictions on the interstate sale of firearms unless certain licenses are obtained.
The Company does not manufacture fully automatic weapons and holds all necessary licenses under these federal laws. Several states
currently have laws in effect similar to the aforementioned legislation.

In 2005, Congress enacted the Protection of
Lawful Commerce in Arms Act (“PLCAA”). The PLCAA was enacted to address abuses by cities and agenda-driven individuals
who wrongly sought to make firearms manufacturers liable for legally manufactured and lawfully sold products if those products
were later used in criminal acts. The Company believes the PLCAA merely codifies common sense and long standing tort principles.
If the PLCAA is repealed or efforts to circumvent it are successful and lawsuits similar to those filed by cities and agenda-driven
individuals in the late 1990s and early 2000s are allowed to proceed, it could have a material adverse impact on the Company.

Currently, federal and several states’
legislatures are considering additional legislation relating to the regulation of firearms. These proposed bills are extremely
varied, but many seek either to restrict or ban the sale and, in some cases, the ownership of various types of firearms. Other
legislation seeks to require new technologies, such as microstamping and so-called “smart gun” technology, that are
not proven, reliable or feasible. Such legislation became effective in California in 2013, and has limited our ability to sell
certain products in California. If similar legislation is enacted in other states, it could effectively ban or severely limit the
sale of affected firearms. There also are legislative proposals to limit magazine capacity.

The Company believes that the lawful private
ownership of firearms is guaranteed by the Second Amendment to the United States Constitution and that the widespread private ownership
of firearms in the United States will continue. However, there can be no assurance that the regulation of firearms will not become
more restrictive in the future and that any such restriction would not have a material adverse effect on the business of the Company.

The Company’s results of operations
could be further adversely affected if legislation with diverse requirements is enacted.

With literally thousands of laws being proposed
at the federal, state and local levels, if even a small percentage of these laws are enacted and they are incongruent, the Company
could find it difficult, expensive or even practically impossible to comply with them, impeding new product development and distribution
of existing products.

The Company’s results of operations could be adversely
affected by litigation.

The Company faces risks arising from various
asserted and unasserted litigation matters. These matters include, but are not limited to, assertions of allegedly defective product
design or manufacture, alleged failure to warn, purported class actions against firearms manufacturers, generally seeking relief
such as medical expense reimbursement, property damages, and punitive damages arising from accidents involving firearms or the
criminal misuse of firearms, and those lawsuits filed on behalf of municipalities alleging harm to the general public. Various
factors or developments can lead to changes in current estimates of liabilities such as final adverse judgment, significant settlement
or changes in applicable law. A future adverse outcome in any one or more of these matters could have a material adverse effect
on the Company’s financial results. See Note 17 to the financial statements which are included in this Annual Report on Form
10-K.

Our insurance may be insufficient to protect us from claims or
losses.

We maintain insurance coverage with third-party
insurers. However, not every risk or liability is or can be protected by insurance, and, for those risks we insure, the limits
of coverage we purchase or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities
incurred. Moreover, there is a risk that commercially available liability insurance will not continue to be available to us at
a reasonable cost, if at all. If liability claims or losses exceed our current or available insurance coverage, our business and
prospects may be harmed.

The Company’s results of operations
could be adversely affected by a decrease in demand for Company products.

If demand for the Company’s products
decreases significantly, the Company would be unable to efficiently utilize its capacity, and profitability would suffer. Decreased
demand could result from a macroeconomic downturn, or could be specific to the firearms industry. If the decrease in demand occurs
abruptly, the adverse impact would be even greater.

The financial health of our independent distributors is critical
to our success.

Over 90% of our sales are made to 18 federally
licensed, independent wholesale distributors. We review our distributors’ financial statements and have credit insurance
for many of them. However, our credit evaluations of distributors and credit insurance may not be completely effective, especially
if an interest rate increase exacts an additional financial strain.

If one or more independent distributors experience
financial distress or liquidity issues, we may not be able to collect our accounts receivable on a timely basis, which would have
an adverse impact on our operating results and financial condition.

The Company must comply with various laws
and regulations pertaining to workplace safety and environment, environmental matters, and firearms manufacture.

In the normal course of its manufacturing
operations, the Company is subject to numerous federal, state and local laws and governmental regulations, and governmental proceedings
and orders. These laws and regulations pertain to matters like workplace safety and environment, firearms serial number tracking
and control, waste disposal, air emissions and water discharges

into the environment. Noncompliance with any one or more of these laws
and regulations could have a material adverse impact on the Company.

Misconduct of our employees or contractors
could cause us to lose customers and could have a significant adverse impact on our business and reputation.

Misconduct, fraud or other improper activities
by our employees, or contractors could have a material adverse impact on our business and reputation. Such misconduct could include
the failure to comply with federal, state, local or foreign government procurement regulations, regulations regarding the protection
of personal information, laws and regulations relating to antitrust and any other applicable laws or regulations.

Business disruptions at one of the Company’s
manufacturing facilities could adversely affect the Company’s financial results.

The Newport, New Hampshire, Prescott,
Arizona and Mayodan, North Carolina facilities are critical to the Company’s success. These facilities house the
Company’s principal production, research, development, engineering, design, and shipping operations. Any event that
causes a disruption of the operation of any of these facilities for even a relatively short period of time could have a
material adverse effect on the Company’s ability to produce and ship products and to provide service to its
customers.

We rely on our information and communications
systems in our operations. Security breaches and other disruptions could adversely affect our business and results of operations.

Cyber-security threats are significant and
evolving and include, among others, malicious software, attempts to gain unauthorized access to data, and other electronic security
breaches that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected
information and corruption of data. In addition to security threats, we are also subject to other systems failures, including
network, software or hardware failures, whether caused by us, third-party service providers, natural disasters, power shortages,
terrorist attacks or other events. The unavailability of our information or communications systems, the failure of these systems
to perform as anticipated or any significant breach of data security could cause loss of data, disrupt our operations, lead to
financial losses from remedial actions, require significant management attention and resources, and negatively impact our reputation
among our customers and the public, which could have a negative impact on our financial condition, results of operations and liquidity.

Third parties supply the Company with various
raw materials for its firearms and castings, such as fabricated steel components, walnut, birch, beech, maple and laminated lumber
for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts. There is a limited
supply of these materials in the marketplace at any given time, which can cause the purchase prices to vary based upon numerous
market factors. The Company believes that it has adequate quantities of raw materials in inventory or on order to provide ample
time to locate and obtain additional items at then-current market cost without interruption of its manufacturing operations. However,
if market conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot
be obtained, the

Company’s manufacturing processes could be interrupted and the Company’s financial condition or results
of operations could be materially adversely affected.

Retention of key
management is critical to the success of the Company.

We rely on the management and leadership skills
of our senior management team. Our senior executives are not bound by employment agreements. The loss of the services of one or
more of our senior executives or other key personnel could have a significant adverse impact on our business.

The Company’s manufacturing operations
are carried out at four facilities. The following table sets forth certain information regarding each of these facilities:

Approximate Aggregate Usable Square Feet

Status

Segment

Newport, New Hampshire

350,000

Owned

Firearms/Castings

Prescott, Arizona

230,000

Leased

Firearms

Mayodan, North Carolina

220,000

Owned

Firearms

Earth City, Missouri

35,000

Leased

Castings

Each firearms facility contains enclosed
ranges for testing firearms. The lease of the Prescott facility provides for rental payment, which are approximately equivalent
to estimated rates for real property taxes.

The Company has other facilities
that were not used in its manufacturing operations in 2016:

Approximate Aggregate Usable Square Feet

Status

Segment

Southport, Connecticut

25,000

Owned

Corporate

Newport, New Hampshire (Dorr Woolen Building)

45,000

Owned

Firearms

Enfield, Connecticut

10,000

Leased

Firearms

Rochester, New Hampshire

2,000

Leased

Firearms

There are no mortgages or any other major
encumbrance on any of the real estate owned by the Company.

The Company’s principal executive offices
are located in Southport, Connecticut.

The nature of the legal proceedings against
the Company is discussed at Note 17 to the financial statements, which are included in this Form 10-K.

The Company has reported all cases instituted
against it through October 1, 2016, and the results of those cases, where terminated, to the SEC on its previous Form 10-Q and
10-K reports, to which reference is hereby made.

During the three months ending December 31,
2016, one case was formally instituted against the Company, captioned Terry W. Turner v. Sturm, Ruger & Company, Inc.
and Winchester Ammunition, Inc., pending in the United States District Court for the Northern District of Alabama, Eastern
Division.

During the three months ending December 31,
2016, no cases previously reported were settled or dismissed.

The Company’s common stock is traded
on the New York Stock Exchange under the symbol “RGR.” At February 9, 2017, the Company had 1,690 stockholders of record.

The following table sets forth, for the periods
indicated, the high and low sales prices for the Company’s common stock as reported on the New York Stock Exchange and dividends
paid on the Company’s common stock.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

Sturm, Ruger & Company, Inc. (the “Company”)
is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales are from
firearms. Export sales represent approximately 3% of total sales. The Company’s design and manufacturing operations are located
in the United States and almost all product content is domestic. The Company’s firearms are sold through a select number
of independent wholesale distributors, principally to the commercial sporting market.

The Company also manufactures investment castings
made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms and for sale to unaffiliated,
third-party customers. Approximately 1% of sales are from the castings segment.

Orders of many models of firearms from the
independent distributors tend to be stronger in the first quarter of the year and weaker in the third quarter of the year. This
is due in part to the timing of the distributor show season, which occurs during the first quarter.

Results of Operations - 2016

Product Demand

The estimated sell-through of the Company’s products from
the independent distributors to retailers increased 12% in 2016 from 2015. For the same period, the National Instant Criminal Background
Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”))
increased 10%. The increase in estimated sell-through of the Company’s products from the independent distributors to retailers
is attributable to:

·

stronger-than-normal seasonal industry demand, likely bolstered by the political campaigns for the elections in November,

·

strong demand for certain new products,

·

increased production of several products in strong demand, and

·

greater availability of rimfire ammunition which spurred demand for our 10/22 rifle and other rimfire firearms late in the
latter half of the year.

New products represented $192.6 million or
29% of firearms sales in 2016, compared to $115.4 million or 21% of firearms sales in 2015. New product sales include only major
new products that were introduced in the past two years. In 2016, new products included the Precision
Rifle, the AR-556 modern sporting rifle, the LC9s pistol, the Mark IV pistols, the LCP II pistol, and the American
pistol. The AR-556 and the LC9s pistol will not be considered new products in 2017.

Estimated sell-through from distributors to retailers and total
adjusted NICS background checks:

2016

2015

2014

Estimated Units Sold from Distributors to
Retailers (1)

2,007,200

1,793,800

1,669,700

Total Adjusted NICS Background Checks (2)

15,727,700

14,244,200

13,090,400

(1)

The estimates for each period were calculated by taking the beginning inventory at the distributors,
plus shipments from the Company to distributors during the period, less the ending inventory at distributors. These estimates are
only a proxy for actual market demand as they:

·

Rely on data provided by independent distributors
that are not verified by the Company,

·

Do not consider potential timing issues
within the distribution channel, including goods-in-transit, and

·

Do not consider fluctuations in inventory
at retail.

(2)

NICS background checks are performed when the ownership of most firearms, either new or used, is
transferred by a Federal Firearms Licensee. NICS background checks are also performed for permit applications, permit renewals,
and other administrative reasons.

The adjusted NICS data presented above
was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used
for concealed carry (“CCW”) permit application checks as well as checks on active CCW permit databases.

Orders Received and Ending Backlog

The Company uses the estimated unit sell-through
of our products from the independent distributors to retailers, along with inventory levels at the independent distributors and
at the Company, as the key metrics for planning production levels.

Net Orders Received in 2016 increased 49% from
2015. Our ending order backlog of 621,400 units at December 31, 2016 increased 191,100 units from backlog of 430,300 units at December
31, 2015.

The units ordered, value of orders received and ending backlog,
net of Federal Excise Tax, for the trailing three years are as follows (dollars in millions, except average sales price):

2016

2015

2014

Orders Received

$

688.5

$

463.2

$

286.8

Average Sales Price of Orders Received

$

306

$

303

$

311

Ending Backlog

$

195.0

$

137.8

$

204.2

Average Sales Price of Ending Backlog

$

314

$

320

$

313

Production

The Company reviews the estimated sell-through
from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company,
semi-monthly to plan production levels and manage increases in inventory. These reviews and increased production capacity of products
in strong demand resulted in an increase in total unit production of 23.5% in 2016 compared to 2015.

Distributor ending inventory as provided by the independent distributors of the Company’s
products. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by
the distributors.

(4)

This total does not include inventory at retailers. The Company does not have access to data on
retailer inventories.

Year ended December 31, 2016, as compared
to year ended December 31, 2015:

Net Sales

Consolidated net sales were $664.3 million
in 2016. This represents an increase of $113.2 million or 20.5% from 2015 consolidated net sales of $551.1 million.

Firearms segment net sales were $658.4 million
in 2016. This represents an increase of $113.5 million or 20.8% from 2015 firearms net sales of $544.9 million. Firearms unit shipments
increased 18.3% in 2016.

Casting segment net sales were $5.9 million
in 2016. This represents a decrease of $0.3 million or 5.6% from 2015 casting sales of $6.2 million.

Cost of Products Sold and Gross Profit

Consolidated cost of products sold was $444.8
million in 2016. This represents an increase of $65.9 million or 17.4% from 2015 consolidated cost of products sold of $378.9 million.

The gross margin was 33.2% in 2016. This represents
an increase from 31.2% in 2015 as illustrated below:

(in thousands)

Year Ended December 31,

2016

2015

Net sales

$

664,328

100.0%

$

551,094

100.0%

Cost of products sold, before LIFO,
overhead and labor rate adjustments to
inventory, and product liability

441,773

66.5%

375,267

68.1%

LIFO expense

481

0.1%

1,458

0.3%

Overhead rate adjustments to inventory

482

0.1%

1,150

0.2%

Labor rate adjustments to inventory

(17

)

—

139

—

Product liability

2,055

0.3%

920

0.2%

Total cost of products sold

444,774

67.0%

378,934

68.8%

Gross profit

$

219,554

33.0%

$

172,160

31.2%

Cost
of products sold, before LIFO, overhead and labor rate adjustments to inventory, and product liability- In 2016, cost of products
sold, before LIFO, overhead and labor rate adjustments to inventory, and product liability decreased 1.8% as a percentage of sales
compared to 2015. This increased profitability is attributable to increased volume and improved productivity.

LIFO- Gross inventories increased by
$18.1 million in 2016 and decreased $7.7 million in 2015. In 2016 and 2015, the Company recognized LIFO expense of $0.5 million
and $1.5 million, respectively, which increased cost of products sold.

Overhead Rate Change- The net impact
on inventory in 2016 and 2015 from the change in the overhead rates used to absorb overhead expenses into inventory was a decrease
of $0.5 million and $1.2 million, respectively, reflecting increased overhead efficiency. This decrease in inventory value resulted
in a corresponding increase to cost of products sold in 2016 and 2015.

Labor Rate Adjustments- In 2016, the
change in inventory value resulting from the change in the labor rates used to absorb labor expenses into inventory was de minimis.
In 2015, the change in inventory value resulting from the change in the labor rates used to absorb labor expenses into inventory
was a decrease of $0.1 million, reflecting increased labor efficiency. This decrease in inventory value resulted in a corresponding
increase to cost of products sold.

Product
Liability- This expense includes the cost of outside legal fees, insurance, and other expenses incurred in the management
and defense of product liability matters. These costs totaled $2.1 million and $0.9 million in 2016 and 2015, respectively. See
Note 17 in the notes to the financial statements “Contingent Liabilities” for further discussion of the Company’s
product liability.

Gross Profit- Gross profit was $219.6
million or 33.0% of sales in 2016. This is an increase of $47.4 million from 2015 gross profit of $172.2 million or 31.2% of sales
in 2015.

Selling, General and Administrative

Selling, general and administrative expenses
were $85.1 million in 2016, an increase of $7.4 million from $77.7 million in 2015, and a decrease from 14.1% of sales in 2015
to 12.8% of sales in 2016. The increase in selling, general and administrative expenses is primarily attributable to increased
promotional selling expenses, including the “Ruger $5 Million Match Challenge” and the
“2.5 Million Gun Challenge” in 2016.

Other Operating Income, net

Other operating income, net consists of the
following (in thousands):

2016

2015

Gain on sale of operating assets

$

5

$

113

Total other operating income, net

$

5

$

113

Operating Income

Operating income was $134.4 million or
20.2% of sales in 2016. This is an increase of $39.9 million from 2015 operating income of $94.5 million or 17.2% of sales.

Royalty Income

Royalty income was $1.1 million in 2016 and
2015.

Interest Income and Interest Expense

Interest income and interest expense were negligible
in 2016 and 2015.

Other Income (Expense), Net

Other income (expense), net was income of $0.5
million in 2016, a decrease of $0.1 million from income of $0.6 million in 2015.

The effective income tax rate was 35.6% in
2016 and 35.4% in 2015. The increase in the effective tax rate is primarily attributable to a decrease in the domestic production
activities deduction in 2016 compared to 2015.

As a result of the foregoing factors, consolidated
net income was $87.5 million in 2016. This represents an increase of $25.4 million from 2015 consolidated net income of $62.1 million.

Non-GAAP Financial Measure

In an effort to provide
investors with additional information regarding its results, the Company refers to various United States generally accepted accounting
principles (“GAAP”) financial measures and one non-GAAP financial measure, EBITDA, which management believes provides
useful information to investors. This non-GAAP measure may not be comparable to similarly titled measures being disclosed by other
companies. In addition, the Company believes that the non-GAAP financial measure should be considered in addition to, and not in
lieu of, GAAP financial measures. The Company believes that EBITDA is useful to understanding its operating results and the ongoing
performance of its underlying business, as EBITDA provides information on the Company’s ability to meet its capital expenditure
and working capital requirements, and is also an indicator of profitability. The Company believes that this reporting provides
better transparency and comparability to its operating results. The Company uses both GAAP and non-GAAP financial measures to evaluate
the Company’s financial performance.

Non-GAAP
Reconciliation – EBITDA

EBITDA

(Unaudited, dollars in thousands)

Year ended December 31,

2016

2015

Net income

$

87,472

$

62,126

Income tax expense

48,449

33,974

Depreciation and amortization expense

35,355

36,235

Interest expense

186

156

Interest income

(14

)

(5

)

EBITDA

$

171,448

$

132,486

EBITDA
is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this by adding the amount
of interest expense, income tax expense and depreciation and amortization expenses that have been deducted from net income back
into net income, and subtracting the amount of interest income that was included in net income from net income to arrive at EBITDA.
The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense.

After a year of declining demand in 2014, demand
rebounded in 2015 to slightly higher levels and followed typical historical seasonal patterns.

The estimated sell-through of the Company’s
products from the independent distributors to retailers increased 7% in 2015 from 2014. For the same period, the National Instant
Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation
(“NSSF”)) increased 9%.

New products represented $115.4 million or
21% of firearms sales in 2015, compared to $89.4 million or 16% of firearms sales in 2014. New product sales include only major
new products that were introduced in the past two years.

Estimated sell-through from distributors to retailers and total
adjusted NICS background checks:

2015

2014

2013

Estimated Units Sold from Distributors to Retailers (1)

1,793,800

1,669,700

2,091,500

Total Adjusted NICS Background Checks (2)

14,244,200

13,090,400

14,796,900

(1)

The estimates for each period were calculated by taking the beginning inventory at the distributors,
plus shipments from the Company to distributors during the period, less the ending inventory at distributors. These estimates are
only a proxy for actual market demand as they:

·

Rely on data provided by independent distributors
that are not verified by the Company,

·

Do not consider potential timing issues
within the distribution channel, including goods-in-transit, and

·

Do not consider fluctuations in inventory
at retail.

(2)

NICS background checks are performed when the ownership of most firearms, either new or used, is
transferred by a Federal Firearms Licensee. NICS background checks are also performed for permit applications, permit renewals,
and other administrative reasons.

The adjusted NICS data presented above
was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used
for concealed carry (“CCW”) permit application checks as well as checks on active CCW permit databases.

The Company reviews the estimated sell-through
from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company,
semi-monthly to plan production levels and manage increases in inventory. These reviews resulted in decreased total unit production
of 8% in 2015 compared to 2014.

Distributor inventories of the Company’s
products decreased by 55,700 units during 2015 and approximate a reasonable level to support rapid fulfillment of retailer demand.
However, there is still insufficient inventory of certain models that are experiencing strong demand.

Inventory data follows:

December 31,

2015

2014

2013

Units – Company Inventory

87,400

104,200

27,700

Units – Distributor Inventory (3)

271,000

326,700

205,100

Total inventory (4)

358,400

430,900

232,800

(3)

Distributor ending inventory as provided by the independent distributors of the Company’s
products. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by
the distributors.

(4)

This total does not include inventory at retailers. The Company does not have access to data on
retailer inventories.

Distributor ending inventory as provided by the independent distributors of the Company’s
products.

(in millions
except average sales price, net of Federal Excise Tax)

2015

Q4

Q3

Q2

Q1

Orders Received

$

203.4

$

73.1

$

71.9

$

114.8

Average Sales Price of Orders Received

$

292

$

352

$

274

$

327

Ending Backlog

$

137.8

$

80.5

$

123.8

$

185.1

Average Sales Price of Ending Backlog

$

320

$

379

$

310

$

319

2014

Q4

Q3

Q2

Q1

Orders Received

$

74.7

$

50.1

$

42.2

$

119.8

Average Sales Price of Orders Received

$

331

$

321

$

291

$

303

Ending Backlog

$

204.2

$

242.9

$

289.1

$

396.5

Average Sales Price of Ending Backlog

$

313

$

295

$

293

$

293

Net Sales

Consolidated net sales were $551.1 million
in 2015. This represents an increase of $6.6 million or 1.2% from 2014 consolidated net sales of $544.5 million.

Firearms segment net sales were $544.9 million
in 2015. This represents an increase of $2.6 million or 0.5% from 2014 firearms net sales of $542.3 million. Firearms unit shipments
decreased 3.0% in 2015.

Casting segment net sales were $6.2 million
in 2015. This represents an increase of $4.0 million or 183% from 2014 casting sales of $2.2 million.

Cost of Products Sold and Gross Profit

Consolidated cost of products sold was $378.9
million in 2015. This represents an increase of $3.6 million or 1.0% from 2014 consolidated cost of products sold of $375.3 million.

The gross margin was 31.2% in 2015. This represents
a slight increase from 31.1% in 2014 as illustrated below:

(in thousands)

Year Ended December 31,

2015

2014

Net sales

$

551,094

100.0

%

$

544,474

100.0

%

Cost of products sold, before LIFO, overhead and labor rate adjustments to inventory, and product liability

375,267

68.1

%

378,207

69.5

%

LIFO expense

1,458

0.3

%

2,062

0.4

%

Overhead rate adjustments to inventory

1,150

0.2

%

(5,320

)

(1.0

)%

Labor rate adjustments to inventory

139

—

(424

)

(0.1

)%

Product liability

920

0.2

%

775

0.1

%

Total cost of products sold

378,934

68.8

%

375,300

68.9

%

Gross profit

$

172,160

31.2

%

$

169,174

31.1

%

Cost
of products sold, before LIFO, overhead and labor rate adjustments to inventory, and product liability- In 2015, cost of products
sold, before LIFO, overhead and labor rate adjustments to inventory, and product liability decreased 1.4% as a percentage of sales
compared to 2014. This increased profitability is attributable to improved productivity, partially offset by a less favorable
shift in product mix.

LIFO- Gross inventories decreased by
$7.7 million in 2015 and increased $24.8 million in 2014. In 2015 and 2014, the Company recognized LIFO expense of $1.5 million
and $2.1 million, respectively, which increased cost of products sold.

Overhead Rate Change- The net impact
on inventory in 2015 from the change in the overhead rates used to absorb overhead expenses into inventory was a decrease of $1.2
million, reflecting increased overhead efficiency. This decrease in inventory value resulted in a corresponding increase to cost
of products sold in 2015. In 2014, the change in inventory value resulting from the change in the overhead rate used to absorb
overhead expenses into inventory was an increase of $5.3 million, reflecting decreased overhead efficiency. This increase in inventory
value resulted in a corresponding decrease to cost of products sold.

Labor Rate Adjustments- In 2015, the
change in inventory value resulting from the change in the labor rates used to absorb labor expenses into inventory was a decrease
of $0.1 million, reflecting increased labor efficiency. This decrease in inventory value resulted in a corresponding increase to
cost of products sold. The net impact in 2014 from the change in the labor rates used to absorb labor expenses into inventory was
an increase to inventory of $0.4 million, reflecting decreased labor efficiency. This increase in inventory value resulted in a
corresponding decrease to cost of products sold.

Product
Liability- This expense includes the cost of outside legal fees, insurance, and other expenses incurred in the management
and defense of product liability matters. These costs totaled $0.9 million and $0.8 million in 2015 and 2014, respectively. See
Note 17 in the notes to the financial statements “Contingent Liabilities” for further discussion of the Company’s
product liability.

Gross Profit- Gross profit was $172.2
million or 31.2% of sales in 2015. This is an increase of $3.0 million from 2014 gross profit of $169.2 million or 31.1% of sales
in 2014.

Selling, General and Administrative

Selling, general and
administrative expenses were $77.7 million in 2015, an increase of $4.4 million from $73.4 million in 2014, and an increase
from 13.5% of sales in 2014 to 14.1% of sales in 2015. The increase in selling, general and administrative expenses is
primarily attributable to increased promotional selling expenses, including a new, summer round of promotions, the “2
Million Gun Challenge to Benefit the NRA” which was not in effect in 2014, and the $2.9 million cost of protecting
distributor inventory related to the price reduction in the Ruger LCP.

Defined Benefit Pension Plans Settlement
Charge

The Company fully funded and terminated its
hourly and salaried defined-benefit pension plans in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation
requirements in 2014. The settlement and termination of the frozen pension plans resulted in a cash payment of $7.5 million and
an income statement expense of $40.9 million in 2014.

Operating income was $94.5 million or
17.2% of sales in 2015. This is an increase of $38.2 million from 2014 operating income of $56.3 million or 10.4% of sales.

Royalty Income

Royalty income increased to $1.1 million in
2015 from $0.5 million in 2014.

Interest Income

Interest income was negligible in 2015 and
2014.

Interest Expense

Interest expense was negligible in 2015 and
2014.

Other Income (Expense), Net

Other income (expense), net was income of $0.6
million in 2015, unchanged from income of $0.6 million in 2014.

Income Taxes and Net Income

The effective income tax rate was 35.4% in
2015 and 32.5% in 2014. The increase in the effective tax rate is primarily attributable to a decrease in the domestic production
activities deduction in 2015 compared to 2014.

As a result of the foregoing factors, consolidated
net income was $62.1 million in 2015. This represents an increase of $23.5 million from 2014 consolidated net income of $38.6 million.

Non-GAAP Financial Measure

In an effort to provide
investors with additional information regarding its results, the Company refers to various United States generally accepted accounting
principles (“GAAP”) financial measures and one non-GAAP financial measure, EBITDA, which management believes provides
useful information to investors. This non-GAAP measure may not be comparable to similarly titled measures being disclosed by other
companies. In addition, the Company believes that the non-GAAP financial measure should be considered in addition to, and not in
lieu of, GAAP financial measures. The Company believes that EBITDA is useful to understanding its operating results and the ongoing
performance of its underlying business, as EBITDA provides information on the Company’s ability to meet its capital expenditure
and working capital requirements, and is also an indicator of profitability. The Company believes that this reporting provides
better transparency and comparability to its operating results. The Company uses both GAAP and non-GAAP financial measures to evaluate
the Company’s financial performance.

EBITDA
is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this by adding the amount
of interest expense, income tax expense and depreciation and amortization expenses that have been deducted from net income back
into net income, and subtracting the amount of interest income that was included in net income from net income to arrive at EBITDA.
The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense, such as the pension plan
termination expense in 2014.

Financial Condition

Liquidity

At December 31, 2016, the Company had cash
and cash equivalents of $87.1 million. Our pre-LIFO working capital of $185.8 million, less the LIFO reserve of $42.5 million,
resulted in working capital of $142.7 million and a current ratio of 2.8 to 1.

Operations

Cash
provided by operating activities was $104.8 million, $112.6 million, and $55.6 million in 2016, 2015, and 2014, respectively.
The decrease in cash provided in 2016 compared to 2015 is attributable to an increase in inventory in 2016 compared to
a decrease in 2015, partially offset by a decrease in accounts receivable in 2016 compared to an increase in 2015, and increased
profitability in 2016.

The
increase in cash provided in 2015 compared to 2014 is attributable to increased profitability, decreases in inventory and
other assets and increases in accounts payable and accrued employee compensation during 2015, partially offset by an increase in
accounts receivable during the same period.

Third parties supply the Company with
various raw materials for its firearms and castings, such as fabricated steel components, walnut, birch, beech, maple and
laminated lumber for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts.
There is a limited supply of these materials in the marketplace at any given time, which can cause the purchase prices to
vary based upon numerous market factors. The Company believes that it has adequate quantities of raw materials in inventory
or on order to provide sufficient time to locate and obtain additional items at then-current market cost without interruption
of its manufacturing operations. However, if market conditions result in a significant prolonged inflation of certain prices
or if adequate quantities of raw materials cannot be obtained, the Company’s manufacturing processes could be
interrupted and the Company’s financial condition or results of operations could be materially adversely affected.

Investing
and Financing

Capital
expenditures were $35.2 million, $28.7 million, and $45.6 million in 2016, 2015, and 2014, respectively. In 2017, the Company
expects capital expenditures to approximate $40 million, much of which will relate to tooling and fixtures for new product introductions
and to upgrade and modernize manufacturing equipment. Due to market conditions and business circumstances, actual capital expenditures
could vary significantly from the budgeted amount. The Company finances, and intends to continue to finance, all of these activities
with funds provided by operations and current cash.

In
2016, the Company repurchased 283,343 shares of its common stock for $14.0 million in the open market. The average price per share
purchased was $49.43. These purchases were funded with cash on hand. In 2015, the Company repurchased 82,100 shares of its
common stock for $2.8 million in the open market. The average price per share purchased was $34.57. These purchases were funded
with cash on hand. In 2014, the Company repurchased approximately 680,800
shares of its common stock, representing 3.5% of the then outstanding shares, in the open market at an average price of $35.22
per share. These purchases were made with cash held by the Company and no debt was incurred.

From
January 1, 2017 through February 17, 2017, the Company repurchased 633,600 shares of its common stock for $31.5 million
in the open market. The average price per share purchased was $49.67. These purchases were funded with cash on hand.

At December 31, 2016, $59 million remained
authorized for future share repurchases. At February 17, 2017, $27.5 million remained authorized for future share repurchases.

The
Company paid dividends totaling $32.8 million, $20.6 million, and $31.4 million in 2016, 2015, and 2014, respectively. The dividend
varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. Since 2012, the Company’s
practice has been to pay a dividend of approximately 40% of net income.

On February 17, 2017, the Company’s
Board of Directors authorized a dividend of 44¢ per share to shareholders of record on March 17, 2017. The payment of future
dividends depends on many

factors, including internal estimates of future performance, then-current cash, and the Company’s need for
funds.

The Company provides supplemental discretionary
contributions to substantially all employees’ individual 401(k) accounts.

The Company fully funded and terminated its
hourly and salaried defined-benefit pension plans in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation
requirements in the fourth quarter of 2014. Plan participants were not adversely affected by the plan terminations, but rather
had their benefits either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.

The settlement and termination of the frozen
pension plans resulted in a cash payment of $7.5 million and an income statement expense of $41.0 million in the fourth quarter
of 2014.

The Company contributed $7.5 million, and $3.0
million to the frozen pension plans in 2014 and 2013. Since the plans have been fully funded, settled, and terminated, no further
cash contributions were made in 2015 or will be required in future years.

Based on its unencumbered assets, the Company
believes it has the ability to raise cash through issuance of short-term or long-term debt. The Company’s unsecured $40 million
credit facility, which expires on June 15, 2017, remained unused at December 31, 2016 and the Company has no debt.

Contractual
Obligations

The table below summarizes the Company’s
significant contractual obligations at December 31, 2016, and the effect such obligations are expected to have on the Company’s
liquidity and cash flows in future periods. This table excludes amounts already recorded on the Company’s balance sheet as
current liabilities at December 31, 2016.

“Purchase Obligations” as used
in the below table includes all agreements to purchase goods or services that are enforceable and legally binding on the Company
and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Certain of the Company’s purchase orders or contracts for the
purchase of raw materials and other goods and services that may not necessarily be enforceable or legally binding on the Company
are also included in “Purchase Obligations” in the table, and, therefore, certain of the Company’s purchase orders
or contracts included in the table may represent authorizations to purchase rather than legally binding agreements. The Company
expects to fund all of these commitments with cash flows from operations and current cash.

Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP

—

—

—

—

—

Total

$

13,915

$

13,686

$

229

$

—

—

The expected timing of payment of the obligations
discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending
on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Firearms Legislation
and Litigation

See Item 1A - Risk Factors and Note 17 to the
financial statements which are included in the Annual Report on Form 10-K for a discussion of firearms legislation and litigation.

Other Operational
Matters

In the normal course of its manufacturing operations,
the Company is subject to occasional governmental proceedings and orders pertaining to workplace safety, firearms serial number
tracking and control, waste disposal, air emissions and water discharges into the environment. The Company believes that it is
generally in compliance with applicable Bureau of Alcohol, Tobacco, Firearms & Explosives, environmental, and safety regulations
and the outcome of any proceedings or orders will not have a material adverse effect on the financial position or results of operations
of the Company.

The Company self-insures a significant amount
of its product liability, workers’ compensation, medical, and other insurance. It also carries significant deductible amounts
on various insurance policies.

The Company expects to realize its deferred
tax assets through tax deductions against future taxable income.

Critical Accounting Policies and
Estimates

The preparation of financial statements in
accordance with accounting principles generally accepted in the United States requires management to make assumptions and estimates
that

affect the reported amounts of assets and liabilities as of the balance sheet date and net sales and expenses recognized and
incurred during the reporting period then ended. The Company bases estimates on prior experience, facts and circumstances, and
other assumptions, including those reviewed with actuarial consultants and independent counsel, when applicable, that are believed
to be reasonable. However, actual results may differ from these estimates.

The Company believes the determination of its
product liability accrual is a critical accounting policy. The Company’s management reviews every lawsuit and claim and is
in contact with independent and corporate counsel on an ongoing basis. The provision for product liability claims is based upon
many factors, which vary for each case. These factors include the type of claim, nature and extent of injuries, historical settlement
ranges, jurisdiction where filed, and advice of counsel. An accrual is established for each lawsuit and claim, when appropriate,
based on the nature of each such lawsuit or claim.

Amounts are charged to product liability expense
in the period in which the Company becomes aware that a claim or, in some instances a threat of a claim, has been made when potential
losses or costs of defense are probable and can be reasonably estimated. Such amounts are determined based on the Company’s
experience in defending similar claims. Occasionally, charges are made for claims made in prior periods because the cumulative
actual costs incurred for that claim, or reasonably expected to be incurred in the future, exceed amounts already provided with
respect to such claims. Likewise, credits may be taken if cumulative actual costs incurred for that claim, or reasonably expected
to be incurred in the future, are less than amounts previously provided.

While it is not possible to forecast the outcome
of litigation or the timing of related costs, in the opinion of management, after consultation with independent and corporate counsel,
there is a remote likelihood that litigation, including punitive damage claims, will have a material adverse effect on the financial
position of the Company, but such litigation may have a material impact on the Company’s financial results for a particular
period.

The Company believes the valuation of its inventory
and the related excess and obsolescence reserve is also a critical accounting policy. Inventories are carried at the lower of cost,
principally determined by the last-in, first-out (LIFO) method, or market. An actual valuation of inventory under the LIFO method
is made at the end of each year based on the inventory levels and prevailing inventory costs existing at that time.

The Company determines its excess and obsolescence
reserve by projecting the year in which inventory will be consumed into a finished product. Given ever-changing market conditions,
customer preferences and the anticipated introduction of new products, it does not seem prudent nor supportable to carry inventory
at full cost beyond that needed during the next 36 months.

the requirement for entities to separate deferred tax liabilities and
assets into current and noncurrent amounts in classified balance sheets.
Instead, it requires deferred tax assets and liabilities be classified as noncurrent in the balance sheet. ASU 2015-17 is effective
for financial statements issued for annual periods beginning after December 15, 2016. This ASU is not expected to have a material
impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition
guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative
effect transition method. In August 2015, the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 one year making
it effective for annual reporting periods beginning after December 15, 2017. We plan to adopt the provisions of ASU 2014-09 on
a modified retrospective basis. We do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated revenue.
We continue to assess the overall impact the adoption of ASU 2014-09 will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02,
"Leases" (ASU 2016-02), which requires companies to recognize leased assets and liabilities for both capital and operating
leases. ASU 2016-02 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years, with early adoption permitted. Companies are required to adopt the guidance using a modified
retrospective method. While the Company is currently assessing the impact ASU 2016-02 will have on the consolidated financial
statements, the adoption of this standard is not expected to have a material impact to our consolidated financial position.

Forward-Looking Statements and Projections

The Company may, from time to time, make forward-looking
statements and projections concerning future expectations. Such statements are based on current expectations and are subject to
certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings,
the need for external financing for operations or capital expenditures, the results of pending litigation against the Company,
the impact of future firearms control and environmental legislation and accounting estimates, any one or more of which could cause
actual results to differ materially from those projected. Words such as “expect,” “believe,” “anticipate,”
“intend,” “estimate,” “will,” “should,” “could” and other words and
terms of similar meaning, typically identify such forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date such forward-looking statements are made or to reflect
the occurrence of subsequent unanticipated events.

The Company is exposed to changing interest
rates on its investments, which consist primarily of United States Treasury instruments with short-term (less than one year) maturities
and cash. The interest rate market risk implicit in the Company's investments at any given time is low, as the investments mature
within short periods and the Company does not have significant exposure to changing interest rates on invested cash.

The Company has not undertaken any actions
to cover interest rate market risk and is not a party to any interest rate market risk management activities.

A hypothetical 100 basis point change in market
interest rates over the next year would not materially impact the Company’s earnings or cash flows. A hypothetical 100 basis
point change in market interest rates would not have a material effect on the fair value of the Company’s investments.

We have audited Sturm, Ruger & Company, Inc. and Subsidiary's
(“the Company”) internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in 2013. The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, Sturm, Ruger & Company, Inc. and Subsidiary
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sturm, Ruger & Company, Inc.
and Subsidiary as of December 31, 2016 and 2015, and the related consolidated statements of income and comprehensive income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2016, and our report dated February 22, 2017
expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheets
of Sturm, Ruger & Company, Inc. and Subsidiary as of December 31, 2016 and 2015, and the related consolidated statements of
income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December
31, 2016. Our audits also included the financial statement schedule of Sturm, Ruger & Company, Inc. and Subsidiary (“the
Company”) listed in Item 15(a). These consolidated financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule
based on our audits.

We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Sturm, Ruger & Company, Inc. and Subsidiary as
of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Sturm, Ruger & Company, Inc. and Subsidiary’s internal control
over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 22, 2017
expressed an unqualified opinion on the effectiveness of Sturm, Ruger & Company, Inc. and Subsidiary’s internal control
over financial reporting.

Sturm, Ruger & Company, Inc. (the “Company”)
is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales were
from firearms. Export sales represented approximately 3% of firearms sales. The Company’s design and manufacturing operations
are located in the United States and almost all product content is domestic. The Company’s firearms are sold through a select
number of independent wholesale distributors principally to the commercial sporting market.

The Company manufactures investment castings
made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms and utilizes available
capacity to manufacture and sell investment castings and MIM parts to unaffiliated, third-party customers. Castings were approximately
1% of the Company’s total sales for the year ended December 31, 2016.

Preparation
of Financial Statements

The Company follows United States generally
accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.

The significant accounting policies described
below, together with the notes that follow, are an integral part of the Financial Statements.

Principles
of Consolidation

The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

Revenue
Recognition

Substantially all product sales are sold FOB
(free on board) shipping point. Revenue is recognized when product is shipped and the customer takes ownership and assumes the
risk of loss. Accruals are made for sales discounts and incentives based on the Company’s experience. The Company accounts
for cash sales discounts as a reduction in sales and sales incentives as a charge to selling expense. Amounts billed to customers
for shipping and handling fees are included in net sales and costs incurred by the Company for the delivery of goods are classified
as selling expenses. Federal excise taxes are excluded from net sales.

The Company considers interest-bearing deposits
with financial institutions with remaining maturities of three months or less at the time of acquisition to be cash equivalents.

Accounts Receivable

The Company establishes an allowance for doubtful
accounts based on the creditworthiness of its customers and historical experience. While the Company uses the best information
available to make its evaluation, future adjustments to the allowance for doubtful accounts may be necessary if there are significant
changes in economic and industry conditions or any other factors considered in the Company’s evaluation. Bad debt expense
has been immaterial during each of the last three years.

Inventories

Substantially all of the Company’s inventories
are valued at the lower of cost, principally determined by the last-in, first-out (LIFO) method, or market. Elements of cost in
inventories include raw materials, direct labor and manufacturing overhead.

Property,
Plant, and Equipment

Property, plant, and equipment are carried
at cost. Depreciation is computed over useful lives using the straight-line and declining balance methods predominately over 15
years for buildings, 7 years for machinery and equipment and 3 years for tools and dies. When assets are retired, sold or otherwise
disposed of, their gross carrying values and related accumulated depreciation are removed from the accounts and a gain or loss
on such disposals is recognized when appropriate.

Maintenance and repairs are charged to operations;
replacements and improvements are capitalized.

Long-lived Assets

The Company evaluates the carrying value of
long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable.
In performing this review, the carrying value of the assets is compared to the projected undiscounted cash flows to be generated
from the assets. If the sum of the undiscounted expected future cash flows is less than the carrying value of the assets, the assets
are considered to be impaired. Impairment losses are measured as the amount by which the carrying value of the assets exceeds their
fair value. The Company bases fair value of the assets on quoted market prices if available or, if not available, quoted market
prices of similar assets. Where quoted market prices are not available, the Company estimates fair value using the estimated future
cash flows generated by the assets discounted at a rate commensurate with the risks associated with the recovery of the assets.

Income taxes are accounted for using the asset
and liability method. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences”
by applying enacted statutory rates applicable to future years to temporary differences between the financial statement carrying
amounts and the tax basis of the Company’s assets and liabilities.

Product
Liability

The Company provides for product liability
claims including estimated legal costs to be incurred defending such claims. The provision for product liability claims is charged
to cost of products sold.

Advertising Costs

The Company expenses advertising costs as incurred.
Advertising expenses for 2016, 2015, and 2014, were $2.9 million, $3.0 million, and $3.6 million, respectively.

Shipping
Costs

Costs incurred related to the shipment of products
are included in selling expense. Such costs totaled $5.7 million, $6.4 million, and $7.1 million in 2016, 2015, and 2014, respectively.

Research and Development

In 2016, 2015, and 2014, the Company spent
approximately $8.7 million, $8.5 million, and $10.0 million, respectively, on research and development activities relating to new
products and the improvement of existing products. These costs are expensed as incurred.

Earnings per Share

Basic earnings per share is based upon the
weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the impact of
options, restricted stock units, and deferred stock outstanding using the treasury stock method.

Recent Accounting Pronouncements

In November 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-17, Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes. This ASU simplifies the presentation of deferred income taxes by eliminating the
requirement for entities to separate deferred tax liabilities and assets into current and noncurrent amounts in classified balance
sheets. Instead, it requires deferred tax assets and liabilities be classified as noncurrent in the balance sheet. ASU 2015-17
is effective for financial statements issued for annual periods beginning after December 15, 2016. This ASU is not expected to
have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition
guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative
effect transition method. In August 2015, the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 one year making
it effective for annual reporting periods beginning after December 15, 2017. We plan to adopt the provisions of ASU 2014-09 on
a modified retrospective basis. We do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated revenue.
We continue to assess the overall impact the adoption of ASU 2014-09 will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02,
"Leases" (ASU 2016-02), which requires companies to recognize leased assets and liabilities for both capital and operating
leases. ASU 2016-02 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years, with early adoption permitted. Companies are required to adopt the guidance using a modified
retrospective method. While the Company is currently assessing the impact ASU 2016-02 will have on the consolidated financial
statements, the adoption of this standard is not expected to have a material impact to our consolidated financial position.

2.

Trade Receivables, Net

Trade receivables consist of the following:

December 31,

2016

2015

Trade receivables

$

71,247

$

73,564

Allowance for doubtful accounts

(400

)

(400

)

Allowance for discounts

(1,405

)

(1,443

)

$

69,442

$

71,721

In 2016, the largest individual trade receivable
balances accounted for 19%, 15%, 14%, and 11% of total trade receivables, respectively.

In 2015, the largest individual trade receivable
balances accounted for 24%, 21%, 12%, and 12% of total trade receivables, respectively.

In 2015, inventory quantities were reduced.
This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared
with the current cost of purchases, the effect of which decreased costs of products sold by approximately $0.1 million in 2015.

4. Property,
Plant and Equipment

Property, plant and equipment consist of the
following:

December 31,

2016

2015

Land and improvements

$

1,986

$

1,930

Buildings and improvements

49,183

46,354

Machinery and equipment

242,169

216,055

Dies and tools

38,301

44,258

$

331,639

$

308,597

In 2013, the Company revised its estimate of
the useful life of machinery and equipment from 10 to 7 years. This change, which became effective December 31, 2013, resulted
in increased depreciation expense of $2.5 million and $7.1 million for 2015 and 2014, respectively, and a decrease in depreciation
expense of $1.2 million in 2016.

The capitalized cost of patents is amortized
using the straight-line method over their useful lives. The cost of patent amortization was $0.3 million, $0.3 million, and $0.3
million in 2016, 2015, and 2014, respectively. The estimated annual patent amortization cost for each of the next five years is
$0.3 million. Costs incurred to maintain existing patents are charged to expense in the year incurred.

Software development costs were incurred to
develop and implement an integrated ERP system prior to the time the system became operational. These costs were capitalized and
amortized using the straight line method over a period of sixty months. They became completely amortized in 2016. Costs incurred
subsequent to the system becoming operational are being expensed. The cost of software development cost amortization was $0.3
million, $0.4 million, and $0.4 million in 2016, 2015, and 2014, respectively.

6. Trade
Accounts Payable and Accrued Expenses

Trade accounts payable and accrued expenses
consist of the following:

December 31,

2016

2015

Trade accounts payable

$

16,973

$

13,073

Federal excise taxes payable

14,275

13,945

Accrued other

17,245

15,973

$

48,493

$

42,991

7.Line
of Credit

The Company has an unsecured $40 million revolving
line of credit with a bank. This facility, which is renewable annually, has an expiration date of June 15, 2017.

The credit facility remained unused throughout
2015 and 2016. Borrowings under this facility would bear interest at LIBOR (1.687% at December 31, 2016) plus 200 basis points
and the Company is charged three-eighths of a percent (0.375%) per year on the unused portion. At

December 31, 2016 and 2015, the
Company was in compliance with the terms and covenants of the credit facility.

8. Employee
Benefit Plans

Defined-Contribution Plan

The Company sponsors a qualified defined-contribution
401(k) plan that covers substantially all of its employees. Under the terms of the 401(k) plan, the Company matches a certain portion
of employee contributions to their individual 401(k) accounts using the “safe harbor” guidelines provided in the Internal
Revenue Code. Expenses related to matching employee contributions to the 401(k) plan were $3.7 million, $3.3 million, and $3.2
million in 2016, 2015, and 2014, respectively.

Additionally, in 2016, 2015, and 2014 the Company
provided discretionary supplemental contributions to the individual 401(k) accounts of substantially all employees. Each employee
received a supplemental contribution to their account based on a uniform percentage of qualifying compensation established annually.
The cost of these supplemental contributions totaled $6.0 million, $5.0 million, and $5.6 million in 2016, 2015, and 2014, respectively.

Defined-Benefit Plans

The Company previously sponsored two qualified
defined-benefit pension plans that covered substantially all employees. In 2007, the Company amended its defined-benefit pension
plans so that employees no longer accrued benefits under them. This action “froze” the benefits for all employees and
prevented future hires from joining the plans.

In December 2014 the Company terminated its
defined benefit pension plans and settled all obligations to employees. As a result of the termination of the plans, the Company
recognized an expense of $41.0 million in the fourth quarter of 2014, primarily comprised of the recognition of previously deferred
actuarial losses.

Active employees, all of whom were 100 percent
vested in their pension benefits, were given the option of rolling the actuarially determined present value of their benefits into
their 401(k) accounts, receiving deferred annuity contracts issued by an insurance carrier, or receiving a lump sum payment.

The Company contributed $7.5 million to the
frozen pension plans in 2014 in order to fully fund the settlement, representing the shortfall of the existing pension fund assets
on the termination date to the settlement value. Since the plans have been fully funded and settled, no cash contributions were
required in 2015 or 2016, nor will any be required in future years.

In conjunction with the termination and settlement
of the defined-benefit pension plans, the additional minimum pension liability was fully recognized in 2014. The Company recorded
an adjustment to the additional minimum pension liability, net of tax, which increased comprehensive income by $19.4 million in
2014.

The Company files income tax returns in the
U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal
and state income tax examinations by tax authorities for years before 2013.

The federal and state income tax provision consisted of the following:

Year ended December 31,

2016

2015

2014

Current

Deferred

Current

Deferred

Current

Deferred

Federal

$

31,393

$

10,181

$

31,382

$

(2,774

)

$

25,797

$

(10,429

)

State

5,678

1,197

5,849

(483

)

5,019

(1,775

)

$

37,071

$

11,378

$

37,231

$

(3,257

)

$

30,816

$

(12,204

)

The effective income tax rate varied from the statutory
federal income tax rate as follows:

Significant components of the Company’s
deferred tax assets and liabilities are as follows:

December 31,

2016

2015

Deferred tax assets

Product Liability

$

655

$

263

Employee compensation and benefits

3,627

3,822

Allowances for doubtful accounts and discounts

3,813

3,454

Inventories

981

886

Stock-based compensation

2,527

5,410

Other

1,533

1,623

Total deferred tax assets

13,136

15,458

Deferred tax liabilities:

Depreciation

12,457

12,946

Other

345

343

Total deferred tax liabilities

12,802

13,289

Net deferred tax assets

$

334

$

2,169

The Company made income tax payments of approximately
$43.0 million, $27.5 million, and $34.0 million, during 2016, 2015, and 2014, respectively. The Company expects to realize its
deferred tax assets through tax deductions against future taxable income or carry back against taxes previously paid.

The Company does not believe it has included
any “uncertain tax positions” in its federal income tax return or any of the state income tax returns it is currently
filing. The Company has made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in
which the Company does not currently consider itself liable. The Company does not anticipate that such additional taxes, if any,
would result in a material change to its financial position.

11. Earnings Per
Share

Set forth below is a reconciliation of the
numerator and denominator for basic and diluted earnings per share calculations for the periods indicated:

The dilutive effect of outstanding options
and restricted stock units is calculated using the treasury stock method. There are no anti-dilutive stock options in 2016, 2015,
and 2014 because the closing price of the Company’s stock on December 31, 2016, 2015, and 2014 exceeded the strike price
of all outstanding options on that date.

12. Stock
Repurchases

In 2016, 2015, and 2014 the Company repurchased
shares of its common stock. Details of these purchases are as follows:

Period

Total
Number of
Shares
Purchased

Average
Price Paid
per Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Program

Maximum
Dollar
Value of
Shares that
May Yet Be
Purchased
Under the
Program

November 13, 2014 to December 31, 2014

680,813

$

35.22

680,813

January 1, 2015 to January 4, 2015

82,100

$

34.57

82,100

November 2016

179,685

$

49.11

179,685

December 2016

103,658

$

50.00

103,658

Total

1,046,256

$

39.06

1,046,256

$

58,982,000

All of these purchases were made with cash
held by the Company and no debt was incurred.

At December 31, 2016, approximately $59 million
remained authorized for share repurchases.

13. Compensation
Plans

In April 2007, the Company adopted and the
shareholders approved the 2007 Stock Incentive Plan (the “2007 SIP”) under which employees, independent contractors,
and non-employee directors may be granted stock options, restricted stock, deferred stock awards, restricted stock units (“RSU’s”),
and stock appreciation rights, any of which may or may not require the achievement of performance objectives. Vesting requirements
are determined by the Compensation Committee of the Board of Directors. The Company reserved 2,550,000 shares for issuance under
the 2007 SIP. At December 31, 2016, an aggregate of 472,000 shares remain available for grant under the 2007 SIP.

Compensation expense related to stock options
is recognized based on the grant-date fair value of the awards estimated using the Black-Scholes option pricing model. Compensation
expense related to deferred stock, restricted stock, and restricted stock units is recognized based on the grant-date fair value
of the Company’s common stock, using either the actual share price or estimated using the Monte Carlo valuation model The
total stock-based compensation cost

In 2015, 4,000 deferred stock awards were issued
to non-employee directors that vested in April 2016 and 5,370 deferred stock awards were issued to non-employee directors that
will vest in April 2018.

In 2014, 3,711 deferred stock awards were issued
to non-employee directors that vested in April 2015 and 7,002 deferred stock awards were issued to non-employee directors that
will vest in April 2017.

Compensation expense related to these awards
is amortized ratably over the vesting period. Compensation expense related to these awards was $0.6 million, $0.6 million and $0.6
million in 2016, 2015, and 2014, respectively.

At December 31, 2016, there was $0.6 million
of unrecognized compensation cost related to deferred stock that is expected to be recognized over a period of three years.

Restricted Stock Units

The Company grants restricted stock units in
lieu of incentive stock options to senior employees. Some of these RSU’s are retention awards and have only time-based vesting.
Other RSU’s have a vesting “double trigger.” The vesting of these RSU’s is dependent on the achievement
of corporate objectives established by the Compensation Committee of the Board of Directors and the passage of time.

During 2016, 61,000 restricted stock units
were issued. Compensation costs related to these restricted stock units was $3.4 million, of which $0.8 million was recognized
in 2016. The remaining costs will be recognized ratably over the remaining periods required before the units vest, which range
from 27 to 49 months.

During 2015, 76,000 restricted stock units
were issued. Compensation costs related to these restricted stock units was $1.9 million, of which $0.5 million was recognized
in 2015. The remaining costs will be recognized ratably over the remaining periods required before the units vest, which range
from 27 to 49 months.

During 2014, 59,000 restricted stock units
were issued. Compensation costs related to these restricted stock units was $3.8 million, of which $1.0 million was recognized
in 2014. The remaining costs are not being recognized since the required performance criteria is not expected to be attained.

At December 31, 2016, there was $3.4 million
of unrecognized compensation cost related to restricted stock units that is expected to be recognized over a period of 4.0 years.

The Company has two reportable operating segments:
firearms and castings. The firearms segment manufactures and sells rifles, pistols, and revolvers principally to a number of federally-licensed,
independent wholesale distributors primarily located in the United States. The castings segment manufactures and sells steel investment
castings and metal injection molding parts.

Corporate segment income relates to interest
income, the sale of non-operating assets, and other non-operating activities. Corporate segment assets consist of cash and other
non-operating assets.

The Company evaluates performance and allocates
resources, in part, based on profit and loss before taxes. The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies (see Note 1). Intersegment sales are recorded at the Company’s
cost plus a fixed profit percentage.

Year ended December 31,

2016

2015

2014

Net Sales

Firearms

$

658,433

$

544,850

$

542,267

Castings

Unaffiliated

5,895

6,244

2,207

Intersegment

36,779

31,585

34,095

42,674

37,829

36,302

Eliminations

(36,779

)

(31,585

)

(34,095

)

$

664,328

$

551,094

$

544,474

Income (Loss) Before Income Taxes

Firearms

$

136,390

$

98,565

$

57,525

Castings

(1,237

)

(3,407

)

(1,294

)

Corporate

768

942

1,009

$

135,921

$

96,100

$

57,240

Identifiable Assets

Firearms

$

242,758

$

221,670

$

211,338

Castings

16,096

15,289

16,772

Corporate

96,550

78,924

26,272

$

355,404

$

315,883

$

254,382

Depreciation

Firearms

$

32,010

$

32,409

$

33,594

Castings

2,688

3,029

2,321

$

34,698

$

35,438

$

35,915

Capital Expenditures

Firearms

$

33,455

$

26,246

$

39,511

Castings

1,760

2,459

6,060

$

35,215

$

28,705

$

45,571

In 2016, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-19%; Lipsey’s-17%; Jerry’s/Ellett
Brothers-15%; and Sports South-14%.

In 2015, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-18%; Lipsey’s-17%; Sports South-13%; and
Jerry’s/Ellett Brothers-11%.

In 2014, the Company’s largest customers
and the percent of total sales they represented were as follows: Davidson’s-19%; Lipsey’s-13%; Sports South-13%; and
Jerry’s/Ellett Brothers-12%.

The Company’s assets are located entirely
in the United States and domestic sales represented at least 96% of total sales in 2016, 2015, and 2014.

15.

Quarterly Results of Operations (Unaudited)

The following is a tabulation of the unaudited
quarterly results of operations for the two years ended December 31, 2016:

Three Months Ended

4/2/16

7/2/16

10/1/16

12/31/16

Net Sales

$

173,109

$

167,944

$

161,427

$

161,848

Gross profit

59,113

56,694

50,251

53,496

Net income

23,278

23,515

19,850

20,829

Basic earnings per share

1.23

1.24

1.05

1.11

Diluted earnings per share

$

1.21

$

1.22

$

1.03

$

1.10

Three Months Ended

3/28/15

6/27/15

9/26/15

12/31/15

Net Sales

$

136,954

$

140,872

$

120,871

$

152,397

Gross profit

41,397

48,508

34,011

48,244

Net income

15,503

17,560

11,963

17,100

Basic earnings per share

0.83

0.94

0.64

0.91

Diluted earnings per share

$

0.81

$

0.91

$

0.62

$

0.88

16.

Related Party Transactions

The Company contracts with the National Rifle
Association (“NRA”) for some of its promotional and advertising activities, primarily the 2016 “Ruger $5 Million
Match Campaign” and the 2015-16 “2.5 Million Gun Challenge”. The Company paid the NRA $8.4 million and $1.6
million in 2016 and 2015, respectively. Payments to the NRA were insignificant in 2014. One of the Company’s Directors also
serves as a Director on the Board of the NRA.

17.

Contingent Liabilities

As of December 31, 2016, the Company was a
defendant in five (5) lawsuits and is aware of certain other such claims. The lawsuits fall into three categories: traditional
product liability litigation, patent litigation and municipal litigation, discussed in turn below.

Three of the five lawsuits mentioned above
involve claims for damages related to allegedly defective products due to their design and/or manufacture. The lawsuits stem from
specific incidents of personal injury and are based on traditional product liability theories such as strict liability, negligence
and/or breach of warranty.

The Company management believes the allegations
in these cases are unfounded, that the incidents are unrelated to the design or manufacture of the firearms, and that there should
be no recovery against the Company.

Patent Litigation

Davies Innovations, Inc. v. Sturm, Ruger
& Company, Inc. is a patent litigation suit originally filed in the United States District Court for the Southern District
of Texas, Galveston Division. The case subsequently was transferred to the United States District Court for the Northern District
of New Hampshire. The suit is based upon alleged patent infringement as the plaintiff claims that certain features of the Ruger
SR-556 and SR-762 modern sporting rifles infringe its patent. The complaint seeks a judgment of infringement and unspecified monetary
damages including costs, fees and treble damages.

The Company management believes the allegations
in this case are unfounded, that there is no infringement of plaintiff’s patent, that plaintiff’s patent is invalid,
and that there should be no recovery against the Company. The Company filed a Motion for Summary Judgment which was heard on December
6, 2016.

Municipal Litigation

Municipal litigation generally includes
those cases brought by cities or other governmental entities against firearms manufacturers, distributors and retailers seeking
to recover damages allegedly arising out of the misuse of firearms by third-parties.

There is only one remaining lawsuit
of this type, filed by the City of Gary in Indiana State Court, over seventeen years ago. The complaint in that case seeks damages,
among other things, for the costs of medical care, police and emergency services, public health services, and other services as
well as punitive damages. In addition, nuisance abatement and/or injunctive relief is sought to change the design, manufacture,
marketing and distribution practices of the various defendants. The suit alleges, among other claims, negligence in the design
of products, public nuisance, negligent distribution and marketing, negligence per se and deceptive advertising. The case does
not allege a specific injury to a specific individual as a result of the misuse or use of any of the Company's products.

After a long procedural history, the
case was scheduled for trial on June 15, 2009. The case was not tried on that date and was largely dormant until a status conference
was held on July 27, 2015. At that time, the court entered a scheduling order setting deadlines for plaintiff to file

a Second
Amended Complaint, for defendants to answer, and for defendants to file dispositive motions. The plaintiff did not file a Second
Amended Complaint by the deadline.

Last year, Indiana passed a new law,
Indiana Code § 34-12-3-1, which applies to the City's case. The defendants filed a joint motion for judgment on the pleadings,
asserting immunity under §34-12-3-1 and asking the court to re-visit the Court of Appeals' earlier decision holding the Protection
of Lawful Commerce in Arms Act inapplicable to the City's claims.

The United States and the Indiana Attorney
General filed motions and briefs in intervention in defense of the constitutionality of the PLCAA and the Indiana Immunity Statute,
respectively. A hearing on the motions to intervene was set for October 12, 2016.

The court subsequently granted the Joint Motion to Stay
Resolution of Manufacturers’ Motion for Judgment on the Pleadings for six months or until the KS&E Sports v. Runnels
case is decided by the Indiana Supreme Court, whichever is earlier. The court also vacated the October 12th hearing
on motions to intervene by the United Sates and the Indiana Attorney General, given the City’s consent to the motions.

Summary of Claimed Damages and Explanation
of Product Liability Accruals

Punitive damages, as well as compensatory damages,
are demanded in certain of the lawsuits and claims. In many instances, the plaintiff does not seek a specified amount of money,
though aggregate amounts ultimately sought may exceed product liability accruals and applicable insurance coverage. For product
liability claims made after July 10, 2000, coverage is provided on an annual basis for losses exceeding $5 million per claim, or
an aggregate maximum loss of $10 million annually, except for certain new claims which might be brought by governments or municipalities
after July 10, 2000, which are excluded from coverage.

The Company management monitors the status
of known claims and the product liability accrual, which includes amounts for asserted and unasserted claims. While it is not possible
to forecast the outcome of litigation or the timing of costs, in the opinion of management, after consultation with special and
corporate counsel, it is not probable and is unlikely that litigation, including punitive damage claims, will have a material adverse
effect on the financial position of the Company, but may have a material impact on the Company’s financial results for a
particular period.

Product liability claim payments are made when
appropriate if, as, and when claimants and the Company reach agreement upon an amount to finally resolve all claims. Legal costs
are paid as the lawsuits and claims develop, the timing of which may vary greatly from case to case. A time schedule cannot be
determined in advance with any reliability concerning when payments will be made in any given case.

Provision is made for product liability claims
based upon many factors related to the severity of the alleged injury and potential liability exposure, based upon prior claim
experience. Because the Company’s experience in defending these lawsuits and claims is that unfavorable outcomes are typically
not probable or estimable, only in rare cases is an accrual established for such costs.

In most cases, an accrual is established
only for estimated legal defense costs. Product liability accruals are periodically reviewed to reflect then-current estimates
of possible liabilities and expenses incurred to date and reasonably anticipated in the future. Threatened product liability claims
are reflected in the Company’s product liability accrual on the same basis as actual claims; i.e., an accrual is made
for reasonably anticipated possible liability and claims-handling expenses on an ongoing basis.

A range of reasonably possible losses relating
to unfavorable outcomes cannot be made. However, in product liability cases in which a dollar amount of damages is claimed, the
amount of damages claimed, which totaled $0.1 million and $0.1 million at December 31, 2016 and 2015, respectively, are set forth
as an indication of possible maximum liability the Company might be required to incur in these cases (regardless of the likelihood
or reasonable probability of any or all of this amount being awarded to claimants) as a result of adverse judgments that are sustained
on appeal.

As of December 31, 2016 and 2015, the Company was a defendant in
5 and 3 lawsuits, respectively, involving its products and is aware of other such claims. During 2016 and 2015, respectively, 3
and 2 claims were filed against the Company, 1 and 1 claims were settled, and no claims were dismissed either year.

The Company’s product liability expense was $2.1 million in
2016, $0.9 million in 2015, and $0.8 million in 2014. This expense includes the cost of outside legal fees, insurance, and other
expenses incurred in the management and defense of product liability matters.

A roll-forward of the product liability reserve and
detail of product liability expense for the three years ended December 31, 2016 follows:

The beginning and ending liability balances represent accrued legal fees only. Settlements and
administrative costs are expensed as incurred. Only in rare instances is an accrual established for settlements.

(b)

The expense accrued in the liability is for legal fees only. In 2014 and 2015, the costs incurred
related to cases that were settled or dismissed were less than the amounts accrued for these cases in prior years.

Settlements represent payments made to plaintiffs or allegedly injured parties in exchange for
a full and complete release of liability.

(e)

Insurance expense represents the cost of insurance premiums.

There were no insurance recoveries during any
of the above years.

18.

Financial Instruments

The Company does not hold or issue financial
instruments for trading or hedging purposes, nor does it hold interest rate, leveraged, or other types of derivative financial
instruments. Fair values of accounts receivable, accounts payable, accrued expenses and income taxes payable reflected in the December
31, 2016 and 2015 balance sheets approximate carrying values at those dates.

19.

Subsequent Events

On February 17, 2017, the Company’s Board
of Directors authorized a dividend of 44¢ per share to shareholders of record on March 17, 2017.

From
January 1, 2017 through February 17, 2017, the Company repurchased 633,600 shares of its common stock for $31.5 million
in the open market. The average price per share purchased

was $49.67. These purchases were funded with cash on hand. At
February 17, 2017, $27.5 million remained authorized for future share repurchases.

The Company’s management has evaluated
transactions occurring subsequent to December 31, 2016 and determined that there were no events or transactions during that period
that would have a material impact on the Company’s results of operations or financial position.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A—

CONTROLS AND PROCEDURES

Evaluation
of Disclosure Controls and Procedures

The Company conducted an evaluation, with the
participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended, as of December 31, 2016. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that as of December 31, 2016, the Company’s disclosure controls and procedures over financial reporting were
effective.

Management’s Report on Internal Control over Financial
Reporting

The Company’s management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

The Company conducted an evaluation, with the
participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial
reporting as of December 31, 2016. This evaluation was performed based on the criteria established in “Internal Control —
Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in 2013.

Management has concluded that the Company maintained
effective internal control over financial reporting as of December 31, 2016, based on criteria established in “Internal Control —
Integrated Framework” issued by the COSO in 2013.

The effectiveness of the Company’s internal
control over financial reporting as of December 31, 2016 has been audited by RSM US LLP, an independent registered public accounting
firm, as stated in their report which is included in this Form 10-K.

Changes in Internal Control over Financial
Reporting

There were no changes in our internal control
over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Pursuant to Section 303A.12(a) of the
New York Stock Exchange Listed Company Manual, the Company submitted an unqualified certification of our Chief Executive Officer
to the New York Stock Exchange in 2016. The Company has also filed, as exhibits to this Annual Report on Form 10-K, the Chief Executive
Officer and Chief Financial Officer Certifications required under the Sarbanes-Oxley Act of 2002.

ITEM 9B—

OTHER INFORMATION

None.

PART III

ITEM 10—

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning the Company’s
directors, including the Company’s separately designated standing audit committee, and on the Company’s code of business
conduct and ethics required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the
2017 Annual Meeting of Stockholders scheduled to be held May 9, 2017, which will be filed with the SEC in March 2017.

Information concerning the Company’s
executive officers required by this Item is set forth in Item 1 of this Annual Report on Form 10-K under the caption “Executive
Officers of the Company.”

Information concerning beneficial ownership
reporting compliance required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the
2017 Annual Meeting of Stockholders scheduled to be held May 9, 2017, which will be filed with the SEC in March 2017.

ITEM 11—

EXECUTIVE COMPENSATION

Information concerning director and executive
compensation required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2017 Annual
Meeting of Stockholders scheduled to be held May 9, 2017, which will be filed with the SEC in March 2017.

Information concerning the security ownership
of certain beneficial owners and management and related stockholder matters required by this Item is incorporated by reference
from the Company’s Proxy Statement relating to the 2017 Annual Meeting of Stockholders scheduled to be held May 9, 2017,
which will be filed with the SEC in March 2017.

Information concerning certain relationships
and related transactions required by this Item is incorporated by reference from the Company’s Proxy Statement relating to
the 2017 Annual Meeting of Stockholders scheduled to be held May 9, 2017.

ITEM 14—

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning the Company’s
principal accountant fees and services and the pre-approval policies and procedures of the audit committee of the board of directors
required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2017 Annual Meeting
of Stockholders scheduled to be held May 9, 2017, which will be filed with the SEC in March 2017.

Financial Statements can be found under Item 8 of Part II of this Form 10-K

(2)

Schedules can be found on Page 86 of this Form 10-K

(3)

Listing of Exhibits:

Exhibit 3.1

Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibits 4.1 and 4.2 to the Form S-3 Registration Statement previously filed by the Company File No. 33-62702).

Exhibit 3.2

Bylaws of the Company, as amended.

Exhibit 3.3

Amended and restated Article 3, Section 2 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.4

Amended and restated Article 3, Section 4 and Article 4, Section 5 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.5

Amended and restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2007).

Exhibit 3.6

Amended and restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2008).

Exhibit 3.7

Amendment to Article 5, Section 1 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2009).

Agreement and Assignment of Lease dated September 30, 1987 by and between Emerson Electric Co. and Sturm, Ruger & Company, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Agreement and Release, dated as of February 28, 2006, by and between Sturm, Ruger & Company, Inc. and William B. Ruger (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2006, SEC File No. 1-10435).

Exhibit 10.6

Sale and Purchase Agreement, dated as of September 26, 2006, by and between Sturm, Ruger & Company, Inc. and Ruger Business Holdings, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2006, SEC File No. 1-10435).

Exhibit 10.7

Credit Agreement, dated as of December 14, 2007, by and between the Company and Bank of America (Incorporated by reference to Exhibit 10.18 to the Company's Current Report on Form 8-K filed with the SEC on December 20, 2007).

Exhibit 10.8

Severance Agreement, dated as of April 10, 2008, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.9

Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.10

Severance Agreement, dated as of April 10, 2008, by and between the Company and Mark T. Lang (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.11

Severance Agreement, dated as of April 10, 2008, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Severance Agreement, dated as of April 10, 2008, by and between the Company and Steven M. Maynard (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.13

Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.14

Severance Agreement, dated as of May 2, 2008 by and between the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2008).

Exhibit 10.15

First Amendment to Credit Agreement, dated as of December 15, 2008, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 22, 2008).

Exhibit 10.16

Second Amendment to Credit Agreement, dated December 11, 2009, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2009).

Exhibit 10.17

Fifth Amendment to Credit Agreement, dated February 14, 2013 by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on February 21, 2013).

Exhibit 10.18

Sixth Amendment to Credit Agreement, dated June 9, 2014, by
and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form
8-K filed with the SEC on June 16, 2014).

Exhibit 10.19

Seventh Amendment to Credit Agreement, dated June 5, 2015, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 12, 2015).

Exhibit 10.20

Eighth Amendment to Credit Agreement, dated June 6, 2016, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 8, 2016).

Transition Services and Consulting Agreement, dated August 1, 2016, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Exhibit 10.22

Agreement, dated August 1, 2016, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Exhibit 10.23

Executive Severance Agreement, dated August 1, 2016, by and between the Company and Shawn C. Leska (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Exhibit 23.1

Consent of RSM US LLP

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

Exhibit 31.2

Certification of Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

Exhibit 32.1

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2

Certification of the Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.1

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 1999, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

Exhibit 99.2

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended March 28, 2015, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

Exhibit 99.3

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 26, 2015, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

STURM, RUGER & COMPANY, INC.

(Registrant)

S/THOMAS A. DINEEN

Thomas A. Dineen

Principal Financial Officer

Principal Accounting Officer, Vice President

Treasurer and Chief Financial Officer

February 22, 2017

Date

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibits 4.1 and 4.2 to the Form S-3 Registration Statement previously filed by the Company File No. 33-62702).

Exhibit 3.2

Bylaws of the Company, as amended.

Exhibit 3.3

Amended and restated Article 3, Section 2 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.4

Amended and restated Article 3, Section 4 and Article 4, Section 5 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.5

Amended and restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2007).

Exhibit 3.6

Amended and restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2008).

Exhibit 3.7

Amendment to Article 5, Section 1 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2009).

Agreement and Assignment of Lease dated September 30, 1987 by and between Emerson Electric Co. and Sturm, Ruger & Company, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Agreement and Release, dated as of February 28, 2006, by and between Sturm, Ruger & Company, Inc. and William B. Ruger (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2006, SEC File No. 1-10435).

Exhibit 10.6

Sale and Purchase Agreement, dated as of September 26, 2006, by and between Sturm, Ruger & Company, Inc. and Ruger Business Holdings, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2006, SEC File No. 1-10435).

Exhibit 10.7

Credit Agreement, dated as of December 14, 2007, by and between the Company and Bank of America (Incorporated by reference to Exhibit 10.18 to the Company's Current Report on Form 8-K filed with the SEC on December 20, 2007).

Exhibit 10.8

Severance Agreement, dated as of April 10, 2008, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.9

Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.10

Severance Agreement, dated as of April 10, 2008, by and between the Company and Mark T. Lang (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.11

Severance Agreement, dated as of April 10, 2008, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.12

Severance Agreement, dated as of April 10, 2008, by and between the Company and Steven M. Maynard (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.13

Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.14

Severance Agreement, dated as of May 2, 2008 by and between the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2008).

First Amendment to Credit Agreement, dated as of December 15, 2008, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 22, 2008).

Exhibit 10.16

Second Amendment to Credit Agreement, dated December 11, 2009, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2009).

Exhibit 10.17

Fifth Amendment to Credit Agreement, dated February 14, 2013 by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on February 21, 2013).

Exhibit 10.18

Sixth Amendment to Credit Agreement, dated June 9, 2014, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 16, 2014).

Exhibit 10.19

Seventh Amendment to Credit Agreement, dated June 5, 2015, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 12, 2015).

Exhibit 10.20

Eighth Amendment to Credit Agreement, dated June 6, 2016, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 8, 2016).

Exhibit 10.21

Transition Services and Consulting Agreement, dated August 1, 2016, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Exhibit 10.22

Agreement, dated August 1, 2016, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Exhibit 10.23

Executive Severance Agreement, dated August 1, 2016, by and between the Company and Shawn C. Leska (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).

Certification of the Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the
Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

94

Exhibit 99.1

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 1999,
SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

Exhibit 99.2

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended March 28, 2015, SEC
File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

Exhibit 99.3

Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 26, 2015,
SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

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